Highlights · Perth Zoo, Victorian schools cleaning, ANU student accommodation) >$100 million of...

HighlightsDowner FY18 Results Investor Presentation

2

Underlying NPATA up 58.9% to $296.5m Up 6.7% on a pro forma basis1

Guidance met for seventh consecutive year Revenue2 up 61.5% to $12.6bn (up 16.7% on a pro forma basis) Final dividend increased to 14cps (27cps for FY18, up 12.5%)

FY19 NPATA guidance $335m, up 13.0% Significant opportunity pipelines across all sectors Leading or strong market positions in all sectors Includes increased investment in strategic bids

Cash flow conversion of 91% of EBITDA Reliable and predictable cash-focused service business Spotless conversion of 92% (excluding nRAH) Downer focus and systems having a significant positive impact

Strong balance sheet and liquidity Gearing (including Spotless) reduced to 22.7%3, down from 24.6%

at 31 December 2017 Spotless debt facilities of $1.05bn refinanced on significantly

improved terms (average duration now at 3.2 years) Downer refinanced $400m of syndicated loans and issued an

equivalent of $120m in 15yr JPY notes Undrawn funding capacity and cash in excess of $1.5bn

Work in hand4 increased to $42.0 billion Downer $24.0bn, up from $21.7bn at 31 December 2017 Spotless $18.0bn, up from $17.5bn at 31 December 2017 >75% of revenue secured for FY19 Strong weighted pipeline

Statutory NPAT of $71.1m and NPATA of $117.9m

• All figures above include 100% contribution from Spotless, before minority interest. • Downer’s statutory results are reported under International Financial Reporting Standards. NPATA is a non-IFRS measure. Downer’s amortisation of acquired intangibles (including

Spotless) has a material impact on reported earnings. Amortisation is a non-cash charge and management believes that the exclusion of the amortisation of acquired intangibles from NPAT better reflects the underlying performance of Downer. A full reconciliation from underlying to statutory results is provided on slide 7.

Downer FY18 Results Investor Presentation

3

Underlying trading performance

$m FY18 Pro forma1

FY17

Change Statutory

(%)

ChangePro forma

(%)

Total revenue2 12,620.2 10,818.6 61.5 16.7

EBITDA 783.1 762.3 57.2 2.7

EBITA5 479.6 457.0 68.2 4.9

EBIT 412.9 439.3 48.6 (6.0)

Net interest expense (76.3) (69.1) (>100) (10.4)

Tax expense (86.9) (104.6) (25.0) 16.9

Net profit after tax 249.7 265.6 37.6 (6.0)

NPATA5 296.5 277.9 58.9 6.7

EBITA margin 3.8%

Effective tax rate 25.8%

ROFE6 11.5%

Dividend declared (cps) 27.0

Ordinary dividend payout ratio7 55.7%

Revenue of $12.6bn with increases in all Divisions

Transport revenue +31%, Utilities +18%, Rail +38%, EC&M +20%, Spotless +3% and Mining +4.5%

EBITA margin improvement in Transport, Rail, Mining and Spotless from HY18 with EC&M and Utilities steady

Net interest expense increased by $7m reflecting transaction related interest costs

Dividends up 12.5% to 27cps

Reconciliation of underlying to statutory result on slide 7


4

Operating cash flow

Seventh year of cash flow conversion in excess of 88% of EBITDA

Despite the negative cash impacts of nRAH and substantial “one off” costs during the year, Downer Group cash performance remains strong, predictable and reliable

Spotless conversion 92% of EBITDA (excluding nRAH)

Downer focus and systems are having a significant positive impact on Spotless’ cash management

$m FY18 Pro forma1

FY17

EBIT 412.9 439.3

Add: depreciation and amortisation 370.2 323.0

EBITDA 783.1 762.3Operating cash flow 583.3 632.2Add: Net interest paid8 70.2 59.9

Tax paid 56.0 56.7

Adjusted operating cash flow 709.5 748.8EBITDA conversion 90.6% 98.2%

SpotlessDowner FY18 Results Investor Presentation

5

Underlying NPATA of $94 million, in line with 27 November 2017 market update

Improved cash flow and EBITDA conversion

$1.45 billion of contract renewals and extensions

$500 million of new customers in core markets (e.g. Perth Zoo, Victorian schools cleaning, ANU student accommodation)

>$100 million of work secured through joint bidding (e.g. Victorian Police HQ, Ballarat Energy Storage Project)

>$150 million of revenue leakage captured (e.g. train cleaning, NBN linework, Downer office and depot FM)

Substantial investment in management and capability

Good progress on nRAH. Negotiations with Celsusand the South Australian Government are ongoing and a formal process commenced in June to enable the parties to address the various operational and commercial issues.

GroupFinancials


7

Reconciliation of underlying to statutory result

FY18$m EBIT Net interest

expenseTax

expense NPAT

Add backamortisation of acquired intangibles

post-tax

FY18NPATA

HY18NPATA

Underlying result 412.9 (76.3) (86.9) 249.7 46.8 296.5 132.0

Loss on divestment of freight raili (50.2) - 9.6 (40.6) - (40.6) (40.0)

Mining goodwill impairmentii (76.4) - - (76.4) - (76.4) (76.4)

Auburn rail claimiii (25.0) - 7.5 (17.5) - (17.5) -Spotless integration and residual Strategy Reset costsiv (28.0) (4.8) 8.7 (24.1) - (24.1) (9.9)

Divisional merger costsv (28.5) - 8.5 (20.0) - (20.0) -

Individually Significant Items (208.1) (4.8) 34.3 (178.6) - (178.6) (126.3)

Statutory result 204.8 (81.1) (52.6) 71.1 46.8 117.9 5.7

• Downer’s statutory results are reported under International Financial Reporting Standards. Earnings before individually significant items (ISI) is a non-IFRS measure reported to provide a greater understanding of the underlying business performance of the Group. ISI are detailed in Note B2(b) of the Full Year Financial Report and relate to amounts of expense that are associated with business disposal, impairment of goodwill, Auburn Rail claim, Divisional merge costs and Spotless related transactions.

i. Announced on 21 November 2017 and the 2018 half year results.

ii. Announced on 5 February 2018 and the 2018 half year results.

iii. Announced on 20 March 2018.

iv. Announced on 27 November 2017.

v. Divisional merger costs incurred across the Group following the creation of Mining, Energy and Industrial (MEI) and Transport and Infrastructure (TI) Divisions. These costs include senior management redundancies, surplus lease provisions and asset write-offs arising from systems integration.


Cash flow

Net capital expenditure increased as a result of new Mining equipment and Rail projects

Continued investment in bolt-on acquisitions in Utilities, Transport and Defence

Business Transformation Program completion on budget

Downer dividend increased from 24cps to 27cps (50% franked)

Continued strong liquidity to fund future growth

8

$m FY18 Pro forma1

FY17

Total operating 583.3 632.2Net capital expenditure (360.7) (261.0)

Spotless acquisition9 (391.8) (636.1)

Otheracquisitions (84.1) (167.1)Proceeds on sale of business and assets 134.1 10.4

IT Transformation and other (27.1) (37.2)

Total investing (729.6) (1,091.0)Issue of shares (net of costs) (0.2) 989.9Net proceeds / (repayment) ofborrowings 69.2 (63.2)

Dividends paid (156.7) (180.3)

Total financing (87.7) 746.4Net (decrease) / increase incash held (234.0) 287.6

Cash at 30 June 606.2 844.6Total liquidity 1,531.2 2,034.6


9

Group debt facility maturity profile

Metric June 2018 June 2017

Interest cover10 6.3x 10.0xAdjusted Net Debt / adjusted EBITDAR11 2.2x 2.4x

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A$m Pre Refinance

Syndicated bank facilities Equity Bridge Bilateral bank facilities A$ MTN USPP Other

Weighted average debt duration increased from 2.3 years to 4.0 yearsi

i. Based on the weighted average life of debt facilities (by A$m limit) at 31 December 2017 compared to 30 June 2018

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A$m Post Refinance

Syndicated bank facilities Bilateral bank facilities A$ MTN USPP JPY MTN Other

10

AASB 15 Downer FY18 Results Investor Presentation

Effective from 1 July 2018, new disclosure from FY19 onwards Downer has elected to apply the “cumulative approach”- no restatement of FY18 comparatives Most significant change is introduction of a “highly probable” threshold for revenue recognition This affects Downer’s net assets and opening retained earnings from FY19 No impact on cash flow No impact on lifetime profitability of contracts – it is a timing impact Key areas:̶ contract modifications (claims and variations)̶ contract costs (tender costs)̶ performance obligations and measure of progress


11

AASB 15 – impact on Downer

Reduction in net assets and opening retained earnings on 1 July 2018 (FY19) Preliminary impact included in Note G1 of the

FY18 Financial Report Contract modification adjustment includes

various claims and variations including in relation to Tan Burrup and nRAH FY19 outlook takes into account AASB15

$mEstimated adjustment

at 1 July 2018(after tax)

Contract modifications (claims and variations) 198.9

Contract costs (tender costs) 23.9Change in performance obligations and measure of progress 29.3

Decrease in opening retained earnings 252.1

Note: • Estimated adjustment figures are preliminary and as processes and procedures are further embedded during FY19 it is possible that some changes may result.

Outlook


Market outlook – Australia

Road construction will drive increased project work, road surfacing and bituminous product supply

Downer will continue to benefit from significant State Government investment in public transport and in particular light and heavy rail

NBN volumes will stay strong for FY19 and will start to decline in FY20. This will be replaced in part by investment in 5G, Wireless and other smart city innovations

Growth in Utilities in the short term will be dominated by renewable projects. Water, gas and power distribution will continue to grow and we expect major investment in the nation’s transmission grid to deal with the requirements of renewable and storage capacity

13

Transport and Infrastructure

Roads and Bridges Rail Telco Water and

Wastewater Electricity

(AUD $m) Con

stru

ct

Mai

ntai

n

Con

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Bui

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Con

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Con

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Con

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2017 Size $18,660 $6,375 $4,515 $1,544 $2,507 $11,187 $1,726 $4,720 $2,285 $7,651 $2,874

2022 Size $20,710 $7,332 $8,263 $1,706 $2,810 $6,687 $1,873 $5,191 $2,502 $8,056 $2,936

CAGR 2.1% 2.8% 12.8% 2.0% 2.3% -9.8% 1.6% 1.9% 1.8% 1.0% 0.4%


Market outlook – Australia (continued)

Population growth and government outsourcing will drive substantial growth in social infrastructure opportunities across most Australian States in Health, Education and other government services

Increased investment in transport infrastructure represents a significant opportunity in hard FM

Defence related services will remain strong with opportunities to extend service scope

14

Facilities Services General

Industry Transport and Infra. Health Resources

& Energy Govt. EducationLeisure, Sport &

Entertain.Defence

(AUD $m)

Har

d +

Sof

t FM

Har

d +

Sof

t FM

Har

d +

Sof

t FM

Har

d +

Sof

t FM

Har

d +

Sof

t FM

Har

d +

Sof

t FM

Har

d +

Sof

t FM

Har

d FM

2017 Size $3,717 $3,416 $3,380 $4,246 $4,152 $1,691 $923 $2,400

2022 Size $3,633 $4,459 $4,660 $4,410 $4,457 $2,126 $1,034 $2,700

CAGR -0.5% 5.5% 6.6% 0.8% 1.4% 4.7% 2.3% 2.4%


Market outlook – Australia (continued)

Expectation of growth has returned to bulk commodities, base metals and precious minerals. Increased demand for mining capacity and equipment

Strong growth expected in our minerals processing business

Decline in Oil & Gas construction is partially offset by strong growth in maintenance – though at lower volumes

Increased investment in iron ore greenfield and brownfield expansion and optimisation

15

Mining, Energy and Industrial

Iron Ore Coal Oil & GasCopper, Gold,

Silver-Lead-Zinc & Mineral Sands

(AUD $m) Con

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Con

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Con

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2017 Size $1,407 $3,634 $717 $2,459 $4,474 $2,682 $31,772 $1,695 $1,335 $2,162 $2,227 $1,425

2022 Size $2,935 $3,858 $908 $2,877 $4,914 $3,118 $15,562 $2,585 $4,700 $2,324 $2,472 $1,687

CAGR 15.8% 1.2% 4.9% 3.2% 1.9% 3.1% -13.3% 8.8% 28.6% 1.5% 2.1% 3.4%


Market outlook – New Zealand

Road construction to reduce in the short term with strong growth in rail and light rail associated with the Government shift from road investments to public transport schemes. Opportunities for Downer in both construction and operations

Road network management and related maintenance to remain strong

Moderate growth across Utilities related to greater levels of contestability and outsourcing

Non-residential commercial building will remain strong with significant demand for Hawkins’ services

16

New Zealand Roads and Bridges Rail Telco Water and

Wastewater ElectricityNon-Resi

Building

(NZD $m) Con

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2017 Size $1,776 $1,094 $234 $1,599 $1,428 $325 $1,090 $483 $8,386

2022 Size $1,498 $1,055 $670 $1,675 $1,316 $366 $1,246 $505 $8,174

CAGR -3.3% -0.7% 23.4% 0.9% -1.6% 2.4% 2.7% 0.9% -0.5%


17

Work-in-hand $42.0 billion

02468

101214161820

Transport Utilities EC&M Mining Rail Spotless

Dec-17 Jun-18

A$ b

illio

n


18

Outlook

Downer is targeting consolidated net profit after tax and before amortisation of acquired intangible assets (NPATA) of $335 million before minority interests

$m FY19 Outlook

NPAT 291

Amortisation of acquired intangible assets (post-tax) 44

NPATA 335

Supplementary information


20

Segment reportingFY18$m Transport Rail Utilities Spotless EC&M Mining Unallocated Total

Segment revenue 2,743.2 732.0 1,783.0 3,093.7 2,382.9 1,309.4 (13.3)12 12,030.9Share of sales from JVs and Associates 73.8 437.2 - 8.1 21.2 49.0 - 589.3

Total revenue2 2,817.0 1,169.2 1,783.0 3,101.8 2,404.1 1,358.4 (13.3) 12,620.2EBITDA 187.1 49.1 115.0 251.6 84.1 177.0 (80.8) 783.1EBITA5 142.9 39.2 94.8 167.7 70.6 50.4 (86.0) 479.6

EBIT 142.5 39.2 92.7 156.7 65.6 50.4 (134.2) 412.9

Individually Significant Items - - - - - - (208.1) (208.1)

Statutory EBIT 142.5 39.2 92.7 156.7 65.6 50.4 (342.3) 204.8EBITA margin 5.1% 3.4% 5.3% 5.4% 2.9% 3.7% 3.8%

Net interest expense (81.1)

Tax expense (52.6)

Net profit after tax 71.1

Underlying NPAT13 249.7

Underlying NPATA5 296.5

21

Service linesEBITA5 $m

142.9

124.9

0

25

50

75

100

125

150

FY18 FY17

EBITA margin

5.1%4.5%

5.8%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

FY18 HY18 FY17

Total revenue2 $m2,817.0

2,153.4

0

500

1,000

1,500

2,000

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ROFE6

24.2%22.2%

0%

5%

10%

15%

20%

25%

30%

FY18 FY17

Transport

EBITA5 $m

39.2

30.3

0

10

20

30

40

50

FY18 FY17

EBITA margin

3.4% 3.3%3.6%

0.0%

1.0%

2.0%

3.0%

4.0%

FY18 HY18 FY17

Total revenue2 $m

1,169.2

850.2

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ROFE6

12.0%

7.3%

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6%

8%

10%

12%

14%

FY18 FY17

Rail


22

Service lines (continued)EBITA5 $m

94.8

84.1

0

20

40

60

80

100

FY18 FY17

EBITA margin

5.3% 5.4% 5.5%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

FY18 HY18 FY17

Total revenue2 $m

1,783.0

1,517.3

0

250

500

750

1,000

1,250

1,500

1,750

2,000

FY18 FY17

ROFE6

26.1%

22.7%

0%

5%

10%

15%

20%

25%

30%

FY18 FY17

Utilities

Underlying EBITA5 $m

167.7 171.8

0

50

100

150

200

FY18 FY17

Underlying EBITA margin

5.4%5.1%

5.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

FY18 HY18 FY17

Total underlying revenue2$m

3,101.8 3,006.3

0

500

1,000

1,500

2,000

2,500

3,000

3,500

FY18 FY17

ROFE6

14.1%

12.1%

0%

2%

4%

6%

8%

10%

12%

14%

16%

FY18 FY17

Spotless


23

Service lines (continued)EBITA5 $m

70.6

52.6

0

20

40

60

80

FY18 FY17

EBITA margin

2.9% 3.0%2.6%

0.0%

1.0%

2.0%

3.0%

4.0%

FY18 HY18 FY17

Total revenue2 $m

2,404.1

2,004.3

0

500

1,000

1,500

2,000

2,500

3,000

FY18 FY17

ROFE6

27.0%

23.0%

0%

5%

10%

15%

20%

25%

30%

FY18 FY17

Engineering, Construction & Maintenance

EBITA5 $m

50.4

83.4

0

20

40

60

80

100

FY18 FY17

EBITA margin

3.7%3.0%

6.4%

0.0%

2.0%

4.0%

6.0%

8.0%

FY18 HY18 FY17

Total revenue2$m

1,358.4 1,300.2

0

250

500

750

1,000

1,250

1,500

FY18 FY17

ROFE6

8.6%

13.2%

0%

2%

4%

6%

8%

10%

12%

14%

FY18 FY17

Mining



24

Debt and bonding facilities

Debt facilities $m DOW SPO Group

Total limit 1,408.7 1,062.5 2,471.2Drawn (713.7) (832.5) (1,546.2)Available 695.0 230.0 925.0Cash 515.0 91.2 606.2Total liquidity 1,210.0 321.2 1,531.2Net debt14 198.7 741.3 940.0

Bonding facilities $m DOW SPO Group

Total limit 1,735.9 180.0 1,915.9Drawn (1,194.7) (146.9) (1,341.6)Available 541.2 33.1 574.3

Debt facilities by type %

Syndicated bank facilities 61Medium term notes 21Bilateral bank facilities 10Private placement notes 7Other 1

100

Debt facilities by geography %

Australia / NZ 82North America 7Asia15 10Europe15 1

100


25

Debt maturity profile – Downer only(by limit as at 30 June 2018)

Note:

• The maturity profile is based on contractual facility maturity dates.

• The maturity profile above excludes debt that has been assumed pursuant to the consolidation of Spotless .

• Weighted average debt duration = 4.5 years (December 2017 = 3.2 years).

• Undrawn $695m as at 30 June 2018.

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ECA finance

Finance leases


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Debt maturity profile – Spotless only(by limit as at 30 June 2018)

Note:

• The maturity profile is based on contractual facility maturity dates.

• Weighted average debt duration = 3.2 years (December 2017 = 1.7 years).

• Debt covenants include adjustments to EBITDA as permitted under the facility documentation

2.9x 2.9x 2.8x

FY17 1HFY18 FY18

DEBT COVENANTS

Net Leverage< 3.5x

Interest Cover

7.3x 7.3x 7.5x

FY17 1HFY18 FY18

> 3.0x

Covenant

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NotesDowner FY18 Results Investor Presentation

27

1. References to ‘pro forma basis’ mean that Spotless’ contribution for the period 1 July 2016 to 30 June 2017 has been included to allow comparison of the combined Downer and Spotless results as if the acquisition had occurred on 1 July 2016. Includes statutory FY17 for Downer and underlying FY17 for Spotless.

2. Total revenue is a non-statutory disclosure and includes revenue from joint ventures and other alliances and other income.3. Gearing = Net debt / net debt + equity. 4. Work-in-hand numbers are unaudited.5. Downer calculates EBITA and NPATA by adjusting EBIT and NPAT to add back acquired intangible assets amortisation expense. Group FY18: $66.7m, $46.8m after-

tax (FY17: $17.7m, $12.3m after-tax). 6. ROFE = EBITA divided by average funds employed (AFE); AFE = Average Opening and Closing Net Debt + Equity. 7. Ordinary dividend payout ratio = Dividends divided by (NPATA – ROADS dividend). 8. Interest and other costs of finance paid minus interest received.9. The amount represents gross consideration paid to achieve 87.8% interest in Spotless.10. June 2018 Interest cover = underlying EBITA divided by underlying net interest expense. The reduction in the interest cover ratio is primarily due to the consolidation of

Spotless’ interest expense for a full 12 months.11. Adjusted Net Debt includes Net Debt plus 6x operating lease expenses in the year. Adjusted EBITDAR equals underlying earnings before interest, tax, depreciation,

amortisation and operating lease expense (on a pro forma rolling 12 month basis). 12. Includes intra-company eliminations and other income 13. Downer calculates Underlying NPAT by adjusting NPAT by post-tax individually significant items of $178.6m.14. Adjusted for the mark-to-market of derivatives and deferred finance charges. 15. Includes A$ Medium Term Notes sold to Asian and European domiciled investors measured at financial close of the transaction.

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